OPEC slashes oil demand forecast, cuts to restore balance

OPEC on Wednesday again slashed its forecast for global oil demand this year as the coronavirus outbreak causes a global recession, although it said record supply cuts by the group and other producers were already helping to rebalance the market.

OPEC now expects global demand to contract by 9.07 million barrels per day (bpd), or 9.1 percent, in 2020, it said in a monthly report. Last month, OPEC expected a contraction of 6.85 million bpd.

Oil prices have collapsed in 2020 with benchmark Brent hitting a 21-year low of $15.98 a barrel on April 22. To tackle the drop, OPEC and its allies agreed to a record supply cut, while the US and other nations said they would pump less. OPEC said these measures were already helping.

“The speedy supply adjustments in addressing the current acute imbalance in the global oil market have already started showing positive response, with rebalancing expected to pick up faster in the coming quarters,” OPEC said in the report.

Oil has recovered to $30 a barrel from the low last month and held onto an earlier gain after the report’s release.

OPEC expects this quarter to see the biggest drop in demand and lowered its demand forecast for the second quarter by 5.4 million bpd. Downside risks remain for consumption in the US, Europe and South Korea, OPEC said.

OPEC lowered its estimate of global economic growth in 2020, forecasting a contraction of 3.4 percent and saying the coronavirus crisis “has caused a recession in the global economy as well as an unprecedented oil demand shock.”